Monthly Archives: April 2012

Lawrence Peter ‘Yogi’ Berra, a man who earned the respect of American baseball fans first as player and then as manager, declared in the early 1960s that, “This is like déjà vu all over again” as two of his players – Mickey Mantle and Roger Maris – made a habit of hitting home runs game after game.  Berra’s words would appear to be an apt description of renewed stress in the euro-zone.

The euro-zone crisis seemed to ease following the large liquidity injection provided by the European Central Bank in two large three-year long-term refinancing operations, which led some commentators to conclude that the turmoil had come to an end.  Indeed, the yield on Spain’s ten-year sovereign debt dropped from a peak of almost seven per cent at the end of November to below five per cent in early March, while the rate available on equivalent Italian debt securities declined by more than 250 basis points over the same period.

The notion that the crisis was over was to prove decidedly premature, as the siesta was brought to an abrupt end by mounting stress in the Kingdom of Spain, an economy that is twice the size of the combined national outputs of Greece, Ireland and Portugal.  A deepening recession combined with fiscal slippage at the regional level pushed Spain back onto investors’ radar screens, and the resulting jump in ten-year yields close to the psychologically important six per cent level, has prompted onlookers to revisit the possibility that the Mediteranean country might eventually require a bail-out.

In order to appreciate the extent of Spain’s economic malaise, it is important to investigate the large macroeconomic imbalances that accumulated during the country’s long boom that lasted from the mid-1990s until crisis struck in 2007.

Spain benefited considerably from EMU membership and economic growth outpaced the OECD average in nine of the ten years pre-crisis, with the yearly increase in GDP exceeding the euro-zone as a whole by one to one-and-a-half percentage points over the period.  However, the long boom was built on shaky foundations that would be badly exposed once economic turbulence struck.

The stellar economic performance was driven primarily by a classic housing bubble alongside an ill-advised construction boom, which was stimulated by the reduction in interest rates that accompanied greater European integration.  The reference rate on home loans dropped from almost ten per cent in 1997 to just 3.3 per cent by 2007, and the resulting increase in housing demand led to a 115 per cent increase in house prices in real terms over the period.  The true extent of the overshoot in the housing market is demonstrated by the fact that price increases outpaced rental growth by roughly seven percentage points a year from the mid-90s until the bubble burst in 2007.

Strong housing demand enabled the construction market to flourish, and the resulting demand for unskilled labour contributed to a massive influx of immigrants in need of shelter, which perpetuated the cycle.  Indeed, the sustained demand for unskilled labour saw the population expand from 40 to 45 million, as the share of foreigners in the overall population jumped from just one-in-fifty in the mid-90s to almost one-in-eight at the boom’s apex.

The construction boom was fuelled not only by Spanish demand for second homes and immigrants in need of shelter, but further impetus was provided through increased home purchases by other EU citizens.  Indeed, net foreign investment in housing ranged from 0.5 and one per cent of Spanish GDP each year from 1999 to 2007.

The supply-side response to strong housing demand was nothing short of phenomenal.  The housing stock increased from 20.8 million in 2001 to 25.1 million, and the annual new supply regularly exceeded the new construction of France, Germany, Italy and the UK combined.  In fact, Spain added a new dwelling for each addition to the population over this period, such that the number of people to fill each home fell to 1.7 – the lowest in the developed world.

The bubble years were accompanied by a credit boom that saw households and non-financial businesses leverage their balance sheets to dangerous levels.  Indeed, household debt as a percentage of disposable income jumped from just 53 per cent earlier in 1997 to a peak of 132 per cent, while non-financial corporate sector debt jumped from less than 50 per cent of GDP to more than 130 per cent over the same period.  Importantly, a disturbingly large current account deficit meant that the debt-fuelled boom became increasingly dependent upon external financing, which rendered the economy vulnerable to a ‘sudden stop’ that duly arrived in 2007.

Investors’ concerns today are focussed on fiscal slippage and question marks over the true level of government debt, which many believe to be more than twenty percentage points higher than the official public debt-to-GDP ratio of 68 per cent.  However, investors should be equally troubled, if not more so, by the large private sector imbalances that have shown only marginal improvement since the crisis began.

Private sector debt remains unsustainably high, while house prices and the excesses in the construction sector will take several years to absorb.  Investors will be aware that troubled private sector debt has a habit of becoming public debt via an ailing banking system.  It’s déjà vu all over again in Spain.

Previously posted on www.charliefell.com

 

Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

What better way to start the summer than coming to work in Boston’s North End for a hot startup? The greenway is a perfect place for lunch and “sight-seeing”, al fresco dining can be had all over the neighborhood, and you can do some really cool work as part of the Currensee team.

Our 30-person company started back in 2008 with a handful of dollars and some good ideas. Fast-forward to today and we’re growing our team of stellar employees. If you don’t know much about who we are, we’re a well-funded, high-energy startup that combines financial services and software development to provide a unique alternative investment service for our clients. Our mission has always been to create trust and transparency in the world of foreign exchange and our $30M in assets under management in just over a year and a half proves it.

Since then, we have steadily grown to a 30+ person company that operates in the heart of Boston’s beautiful North End. The people that currently keep us moving forward, known as the Currensee “Pips,” are truly the ones who make being here everyday an absolute pleasure. This group of innovative and hard working professionals comprised of engineers, sales people, product developers, marketers and many more have all contributed to building Currensee into what it is today.

The best part about our company is our ability to strike a perfect balance between corporate and casual. The professionalism within our spacious building is channeled into running and developing the business, while the general milieu of the environment remains relatively laid back. In one conference room, you’ll find all necessary technology for a fully functioning webinar or international conference call, while in another, you’ll see a couple of plush beanbag chairs available for anyone’s relaxation pleasure. And if you ever do find yourself hungry, (which is highly unlikely given the densely populated scene of Italian cuisine and bevy of food trucks right in our backyard) you will be pleased to find a fully stocked, in-house kitchen.

Though our positions are constantly changing, a few that we are currently looking to fill are: Channel Marketing Manager, PT Web Designer/Developer, VP of Engineering, Web Developer, and Integration Tester. So, if immersing yourself each day in an environment that is both challenging and fulfilling where you are always learning is something that intrigues you, please send your resume to hotjobs@currensee.com. Hope to meet you!

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

The yen is an enigma to many forex market participants. It doesn’t trade like the European currencies, nor does it move like the commodity currencies. Oftentimes, it trades against the dollar the opposite way we would expect given the broader market actions.

There are a lot of things that go into yen trading, like the fiscal year-end in March, that make it unique. That has been furthered along in recent times by the aftereffects of the earthquake. This is all within the broader context of an economy that has struggled to do anything for many years now, with little prospect of reversing that any time soon. The low Japanese interest rates as a result have kept the yen at or near the top of the list of favorite currencies to borrow for carry trade purposes.

We saw a lot of the Japanese bugaboos hit the yen hard during the February/March period when USD/JPY rallied from testing 76 to the downside to probing 84 on the upside. That came after many months of the market going sideways at a time when the markets were looking at the US economy improving, which was supporting the dollar.

As you can see from the chart below, the weekly Bollinger Bands got VERY narrow as a result of the long consolidation. The rally since the range break has taken the Band width in the opposite direction, getting it to near its highest level in the last couple years.

USDJPY Chart

The market has obviously since retraced some of the rapid rally, thanks in part to weaker US economic data starting to get traders thinking the Fed may decide it needs to act to further loosen monetary policy. We’ll find out this week just how far down the path that thought really has gone. In the mean time, we have an interesting technical picture.

I’ve added two lines to the weekly chart which represent important levels for the market from here. The upper one is the high from April of 2011 above 85. The lower line is the high from late October and early November that should now be support. Those create a very good set of bounds between which the market can consolidate while the Bollinger Bands work back toward at least a more normal width.

Drilling down a bit, it is worth looking at the price distribution charts to fine tune the analysis. The chart below features monthly distributions (based on daily moves). Where they are thick, the market has spent the most time. Call these attraction zones. Where they are thin, the market hasn’t spent much time there at all. Call these rejection areas.

USD/JPY Chart

This month USD/JPY moved down to test the price level from February where the market spent the most time (though granted, not very much because of that month’s trending action). The market has bounced from there, essentially rejecting what should have been a good attraction area. As this was also above the peak from Q3 last year, it can be considered an indication of strength. As a result, I like the prospects for the market to work back up toward recent highs. That is perfectly reasonable, even within an overall consolidation.

So what’s the implication of this?

Well, if the market just shifts into consolidation for a while then I think it probably just indicates a market that overreacted to the recent softer US data (especially the jobs report). If USD/JPY eventually extends the rally from 76 to break the April 2011, it will probably do so on the basis of a combination of the concerns about US growth abating but the same not being the case for Japan. The limiting factor, though, is the trade imbalance. If the US economy strengthens sufficiently to increase import demand, that will eventually flow through to benefit the yen.

 

Our Two Cents – Week of 4/23/12

We enjoyed some warm weather in Boston this past weekend before rain pounded the city, but the inclement forecast didn’t dampen our perspectives about the currency markets.

In the U.S., unemployment aid requests remained near a four-month high as weekly jobless claims totaled 386,000. While economists said the March figures were weaker than previous numbers, they downplayed them, saying that the warmer winter may have led to some early hiring in January and February.

In the eurozone, the European Commission said Greece should now have enough money to stick to its economic reform program as the country seeks to improve its financial instabilities. British retail sales increased 1.8 percent, surprising economists because the volume of sales dropped by 0.8 percent last month and were only expected to increase 0.4 percent this time.

For hedge funds, assets rose to new levels as they surged to $2.13 trillion at the end of the first quarter, beating the previous high of $2.04 trillion, set in the middle of last year, according to Hedge Fund Research Inc. The Dow Jones Credit Suisse Hedge Fund Index finished up 0.05 percent in March.

In the foreign exchange space, FXCM reported steady March FX volumes, with retail down 2 percent from February and institutional up 27 percent from February. Retail volume accounted $340 billion, and institutional volume totaled $161 billion.

 

 

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

The first quarter is well and truly over, and investment managers are busy restructuring their portfolios to reflect their updated views of the world.  Unfortunately, far too much time is devoted to the identification of new ‘buy’ ideas, when weeding out the portfolio’s deadwood would in all likelihood prove to be a more fruitful pursuit.  Instead, most investors fund new positions through the sale of winning positions, and consistently violate the investment dictum, “Ride your winners, cut your losers.”

Research shows that investors view the sell decision as being three times more difficult to make than the buy decision, yet the typical investment manager spends seven times more time and energy seeking out new investments than they do on terminating stale old positions.  As Philip Fisher observes in his classic, ‘Common Stocks and Uncommon Profits’, “More money has probably been lost by investors holding a stock they really did not want until they could ‘at least come out even’ than from any other single reason.”

Holding on to losing trades

http://www.ostrichheadinsand.com/

To appreciate the psychological process of aversion to a certain loss, which occurs during risky decision-making and causes investors to hold on to losing positions for far too long, consider the following problems:

Problem One: Imagine that you face the following choice.  You can accept €3,000 for certain, or you can gamble with an 80 per cent chance of winning €4,000 and a 20 per cent chance of winning nothing.  Would you accept the guaranteed €3,000 or take the gamble?

Problem Two: Imagine that you face the following choice.  You can pay €3,000 for certain, or you can gamble with an 80 per cent chance of losing €4,000 and a 20 per cent chance of losing nothing.  Would you pay the guaranteed €3,000 or take the gamble?

Both problems have the same expected value except that the former is defined in the domain of profit and the latter in the domain of loss.  The different choices made are striking in that most individuals take the certain gain offered in the first problem, and accept the gamble offered in the second problem.  Indeed, Nobel Prize winner Daniel Kahneman – working alongside the late Amos Tversky – found that 84 per cent of test subjects selected the guaranteed sum in the first problem, and 70 per cent chose to take the gamble in the second problem.

This bizarre behaviour stems from our neural circuitry, which has evolved to pursue rewards and avoid danger.  Brain scans that track oxygenated blood flow, show that the anticipation of monetary reward triggers the release of dopamine – the body’s pleasure chemical from which the term ‘dope’ is derived – and produces a biological effect that is equivalent to a high sparked by the ingestion of cocaine or love-making.  Further, our innate desire for instant gratification motivates us to capture certain gains through the sale of winning positions far too soon.

Meanwhile, at the other end of the spectrum, actual or prospective financial loss activates the same part of the brain as physical pain, and the hurt caused by a $100 loss is roughly 2 ½ times greater than the pleasure derived from a $100 profit.  Adrenaline is secreted into the bloodstream in response to the threat of financial loss, and the feelings of anxiety, fear and nervousness that arise can be of such intensity that they override the intentions of even the most deliberate thinking.

To avoid the pain arising from a prospective financial loss, most investors bury their heads in the sand like ostriches and pretend the loss doesn’t really exist.  Needless to say, behaving like a 200-pound bird with a two-ounce brain inevitably proves self-defeating, as losing positions continue to grate on performance.  Disturbingly, some investors compound the problem, and add to the losing position in a desperate attempt to increase the chances of breaking even.

The human brain perceives the potential rewards and losses on Wall Street in the same manner that our ancestors struggled for survival on the Serengeti, yet most investors believe that the resulting emotional quirks, which cause the average investor to come up short in the financial markets applies to others and not to them.  However, investors’ tendency to sell winners too soon and hold losers too long is widely documented across the globe.

One study shows that investment managers in Israel hold losing positions more than twice as long as winners.  Another study demonstrates that Finnish investors are 1 ½ times more likely to sell a stock after a sharp rise than after a fall.  Finally, a comprehensive US study shows that among more than 400,000 trades in 8,000 accounts at a US discount brokerage, more than one-fifth of retail investors never sold a single stock that had dropped in price.

The dictum, ‘Ride your winners, cut your losers’ ranks among the most important in the investment rulebook, as human nature causes investors to do the exact opposite.  Bernard Baruch, the legendary early-twentieth century investor known as the Lone Wolf of Wall Street, observed that “Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong.”  Investors should take note and act accordingly.

Previously posted on www.charliefell.com

 

Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

One of my Treasury market colleagues brought up an interesting subject today by way of asking me how many euros the Swiss National Bank (SNB) owns as a result of its intervention to prevent the franc from being too overvalued against the Eurozone currency (which I’ve discussed before). The discussion point he was working toward was that the SNB likely has been a major buyer of German government debt as a result of its euro purchases. That and the flow of capital out of the EZ periphery (Greece, Spain, Portugal, etc.) in to German paper has served to depress yields there.

Consider this. The ECB has set the overnight rate for the euro at 1%, yet the German 2yr yield is currently running at about 0.14%. Compare that to the US were the Fed has set overnight rates at basically 0% and 2yr yields are currently about 0.27%. This negative yield spread (-13 basis points currently) is part of what’s been keeping EUR/USD under pressure.

The chart below shows the relationship between the 2yr Germany-US yield spread and the EUR/USD rate. The upper plot is EUR/USD. The middle plot is the yield differential. The lower plot is the rolling 20-day correlation between the two. Notice how that correlation has been positive the vast majority of the time.

EURUSD Yield Spread

The big question out there among many market participants is why the euro isn’t weaker given all the problems in Europe at the moment. We can look at the low rates in the US and Germany as part of the equation. It’s hard for the yield spread to go too much lower from here so long as US rates aren’t on the rise and Bernanke (and the last US jobs report) has done a pretty good job of keeping them down. If the positive correlation holds, it will likely take improved US economic expectations driving US yields higher to really help push EUR/USD down.

 

Our Two Cents – Week of 4/16/12

The Boston Marathon has finished, the scorching weather has departed and another week has past. While cheering on the runners battling the heat—and Heartbreak Hill—during the 116th Boston Marathon, the financial markets also made a dash for themselves.

In the U.S., consumer confidence held to a four-year high as more Americans said their finances were in better shape. The Bloomberg Consumer Comfort Index posted minus 32.8 in the period ending April 8, second only to the prior week’s minus 31.4 as the highest since March 2008. Strong U.S. retail sales fueled economic growth in the first quarter, and analysts are optimistic that the economy grew at an annual pace of at least 2.5 percent during January-March. Also, the U.S. Federal Reserve said the country’s economy continued to grow at a steady pace since February. According to its latest national economic performance survey, the central bank said five districts, including Boston, reported moderate growth.

In the alternatives, hedge funds are rebounding in 2012 as investors have put more cash into hedge funds during the past month, according to GlobeOp. Now four months into 2012, hedge funds are off to their strongest start since 2006, with the average fund gaining nearly 5 percent in the first quarter of 2012. In 2011, more than 1,100 hedge funds launched, according to Hedge Fund Research.

In the eurozone, industrial production has risen for the first time since August 2011, showing signs of revived economic life for the region.

Strong retail sales ease growth worries, Reuters, April 17, 2012
Hedge funds attracting cash in 2012 rebound, Reuters, April 13, 2012
Consumer Comfort in U.S. Held Last Week Near Four-Year High, Bloomberg, April 12, 2012
US economy grows at steady pace: Federal Reserve, The Economic Times, April 12, 2012
New Sign of Economic Life in the Euro Zone, Institutional Investor, April 12, 2012
Hedge Funds Off to Best Start in Six Years, Wall Street Journal, April 11, 2012
HFR: Over 1,000 Hedge Funds Launch In 2011, FINalternatives, April 10, 2012

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

US stock markets staged their most impressive quarterly performance since the late-1990s during the first three months of the year, as the myriad of concerns weighing on investor sentiment at the start of January slipped into the background.  The major market indices jumped more than ten per cent in the three-month period to bring the cumulative price gains from the lows last October to 28 per cent, though the upward move lacked conviction with average daily trading volumes dropping to the lowest levels since before the technology bubble began in earnest fifteen years ago.

The stellar price action meant that the optimistic year-end targets divined by the Wall Street sales machine just months ago were either matched or exceeded by the quarter’s end, but rather than temper their enthusiasm, the perennial bulls sharpened their pencils and revised their projections higher with some daring to declare that a multi-year bull market was underway.

http://www.neonsign.com/

As the propaganda machine cranked into high gear, more than one strategist likened the decade ahead to the 1950s when stock markets enjoyed a ‘golden age’ following a prolonged period of hibernation.  Back then, as memories of the ‘Great Depression’ faded and fears that a repeat episode lurked in the long grass subsided; investors increasingly shunned the unappealing yields available on default-free Treasury bonds, and embraced the attractive valuations on offer in the stock market.

At first glance, comparisons with the ‘fabulous fifties’ seem quite seductive.  Just like today, the stock market enjoyed impressive gains off the lows set in the summer of 1949 and though prices climbed almost 80 per cent in just three years, equities still looked attractively priced relative to current earnings.  Meanwhile, just like today, the market-determined price of Treasury bonds was distorted by official policy and looked mispriced given the high level of public debt to GDP.

The potent combination of ‘cheap’ stocks and ‘expensive’ bonds saw the former outpace the latter by more than nineteen percentage points per annum over the ten-year period from 1949 to 1959.  Can investors reasonably expect a repeat performance?

As seductive as the comparison might be, there are simply too many differences between the two periods to take the argument seriously.  It is true that the public debt-to-GDP ratio was at similar levels to today following the end of WWII, but private sector debt levels were minimal, which allowed for the expansion of private credit at a more rapid clip than economic growth.

Further, demographics were favourable with young families moving to the suburbs and satisfying their demand for discretionary items such as cars and household appliances through the use of instalment credit for the first time.  The population explosion that occurred during the ‘fifties’ – with an almost twenty per cent increase in the number of American citizens – opened up vast business opportunities, particularly in suburban housing investment where eleven million new homes were built over the decade.

Fast forward to today and private sector fundamentals are completely different.  Demographics are turning less favourable, as the children of the young couples that moved to the suburbs in the 1950s are approaching retirement with insufficient savings to maintain their lifestyles.  Their balance sheets remain in need of repair following the excessive credit growth of previous decades, and the wealth destruction that accompanied the collapse in house prices.

Needless to say, continued household deleveraging will exert a drag on growth for some time to come and restrict the investment opportunities available to the corporate sector.  In this regard, it is not difficult to appreciate why companies hold relatively more cash today than in the recent past.

Not only is the future level of economic growth likely to more than disappoint relative to the ‘fabulous fifties’, which will make the reduction of private and public debt-to-GDP ratios all the more difficult, but stocks are not obviously cheap as they were then.  The stock market may well look undemanding relative to current earnings, but given that corporate profitability is so far above trend, the use of such a metric simply beggars belief.

The ratio of current earnings to their ten-year average is at the highest level since the autumn of 2007 – just before corporate profitability reached its apex.  Some might argue that the use of a ten-year average earnings figure distorts the analysis given the steep decline in corporate profits during the ‘Great Recession.’  However, a longer twenty-year average paints a similarly disturbing picture.

This is only the eighth cycle in more than a century that the ratio has managed to reach levels as high as today, and on each of the seven previous occasions a profit recession was not far away with the corporate sector enduring an average earnings decline of more than twenty per cent over the subsequent three-year period.  The historical evidence suggests that it is safe to say that corporate earnings cannot be relied upon to push stock prices higher from here.

Some perm-bulls expect a repeat of fifties-style equity performance in the years ahead, but the arguments made are a misrepresentation of the facts at best.  Growth prospects are relatively poor today, while equity valuations are far higher.  The yields available on default-free Treasury bonds may well be unattractive, but that does not mean that an investor stampede into equities is imminent.

Previously posted on www.charliefell.com

 

Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

I threw the question of what I should write about this week to a former manager of mine who was a forex dealer back in his younger years and now makes a living telling folks what’s happening in the markets. He tossed back a surprisingly good question:

How can technicals be relevant when central banks are trying to manipulate the market- BOJ with USD/JPY and SNB with EUR/CHF?

I’m sure this is something that others have pondered as well.

Here’s my view on it – speaking as someone who is very much a practicing technical analyst.

Currency intervention by a central bank or other monetary authority (in the US intervention is directed by the Treasury, though it’s executed by the NY Federal Reserve Bank) is just another news item or event that influences exchange rates. Those of us who’ve been around the markets for a while have seen a great many dramatic market reactions to all kinds of developments. Some of them have been triggered by data releases. Some have been driven by news events. Some have been caused by speakers. And some have been the result of intervention action. Heck, some of the moves have come just from the suggestion of intervention without it actually happening.

In other words, intervention is just one more thing that is reflected in the price action we see on the charts. Furthermore, it’s also something that is incorporated into the market’s expectation of the future as part of the price action we’re seeing now. The more market participants anticipate intervention, the more they will factor that into their trading and by extension the more it will influence the price action we see. It works in the same way that stock traders will price in anticipated share buybacks or weak earnings. All markets are discounting mechanisms in some fashion or another, and we can analyze the patterns that are developed in the price action through that process.

So, from my perspective, I don’t view technicals as any less useful in a market where intervention may happen. I use the same methods I would in any other case.

Now, having said that, intervention certainly presents the potential for a major volatility spike on the event (or even the hint of it). If your trading strategy or market analysis is ill-suited to that kind of thing, then while that risk is in the markets you may be best advised to either change the pair(s) you trade or to lengthen your trading time frame out to one where sharp intraday moves aren’t so much of a concern. Alternatively, you could adjust your risk so that you have less exposure for trades going against the likely direction of intervention (like when going short USD/JPY if you think the Bank of Japan is going to sell yen). The analysis doesn’t change, but how you then use it does.

 

It has been quite an exciting day here at Currensee as we’ve been receiving generous coverage on a press release published this morning by the Wall Street Journal’s Market Watch. The premise of the piece highlighted how Currensee’s Trade Leader Investment Program has grown to include over 100 institutional partners who are currently offering the program to their investors and clients.

It is interesting to look back over the timeline beginning at the programs initial inception back in October of 2010, when it was available only to retail investors. It wasn't until roughly a year later that we started providing institutional investors the option of offering the program to their clients, which include asset managers, hedge funds, family offices, introducing brokers, and other financial institutions.

The press release also illustrated how the relatively new realm of online trading platforms are reshaping the way trading happens by allowing investors some degree more control. Javier Paz, senior analyst of Aite Group, explains some components that have contributed to the monumental shifts in forex trading.

"The abundant liquidity of the Forex markets has given rise to a new breed of professional-level traders. This development, along with the popularization of trade-replication technology and prudent copy-trading rules, are the biggest developments in institutional investing since the creation of hedge funds."

The press release definitely brings into perspective just how much this facet of trading is adapting to available technology as a means of improving the way forex investors navigate the world currency markets. Thank you so much to MarketWatch, Elite Group, and the many others who found this information worthy of posting on their blogs and sites - we really appreciate it! Find the full press release here.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.